Corpus ID: 53118012

Propagation of nominal shocks in open economies

  title={Propagation of nominal shocks in open economies},
  author={Danmarks Nationalbank},
  • Danmarks Nationalbank
  • Published 2002
  • Empirical evidence documents substantial persistence in the adjustment process to nominal shocks. Existing open-economy models have failed either to generate interesting dynamics or found that the mechanisms are quantitatively weak. We consider the propagation of nominal shocks in a fully specified stochastic intertemporal open-economy model with incomplete capital markets and staggered nominal wage contracts. It is shown that persistence depends on wage-price interdependencies (spiral), which… CONTINUE READING

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